TPA allows the President to “fast-track” trade agreements for approval or disapproval by Congress. As the United States is engaged in negotiating, in the words of Deputy United States Trade Representative Robert Holleyman, “the most ambitious trade agenda in history,” the necessity of TPA could not be clearer.
The Middle Kingdom Galapagos Island Syndrome: The Cul-De-Sac of Chinese Technology Standards
China has made the development of indigenous technology standards, particularly for information and communications technology (ICT) products, a core component of its industrial development strategy. China has done so believing that indigenous technology standards will advantage China's domestic producers while blocking foreign competitors and reducing royalties that Chinese firms pay for foreign technologies. But, by using indigenous rather than global technology standards for ICT products, China risks engendering a “Galapagos Island” effect that isolates Chinese ICT products, technologies, and markets from global norms, as Japan experienced to the significant detriment of its ICT sector.
This report explains why the development and adoption of global, interoperable technology standards matters. It then explores Japan’s experience with the “Galapagos Island Syndrome,” explaining how that nation’s isolation from global technology markets ultimately inflicted significant damage to an industry that had once been among Japan’s most vibrant.
The report then turns to examining China’s standards development approach and identifies four central shortcomings: 1) it risks picking the wrong standard; 2) it risks delays in standards development (often caused by bureaucratic inefficiency or rivalry) that cause both missed market and economic growth opportunities; 3) it encourages a belief that Chinese markets alone are of sufficient scale; and most importantly 4) even when and if it does succeed in developing indigenous standards, it risks the Galapagos Island effect that isolates China’s ICT products and markets from global ones.
The report concludes by offering recommendations for how China can improve its approach to standards development in a way that benefits China’s ICT enterprises, China’s consumers of ICT products, and even the broader global economy. Among other recommendations, it notes that:
- China should adopt an “open participation model” in product standards development processes and frameworks that is transparent, open, and non-discriminatory for all stakeholders.
- China should remove policies that inappropriately withhold access to standards-development organizations (SDOs) or other Chinese standards-making forums based on where a company or organization is headquartered.
- China should align its standards (including national, industrial, and provincial standards) with international standards and use international standards as the basis of Chinese standards and regulations wherever practical. China should not make minor alterations to existing international standards with the intent of developing a China-only standard.
- Technology that is not developed or registered in China should still be considered for inclusion in Chinese standards.
- Wherever the majority of the rest of a global industry sector has developed a voluntary consensus standardization forum as the preferred venue for the development of certain ICT standards, Chinese industry should join the rest of the sector in the development and use of those standards.
Choosing Growth Over Protectionism
Brazil narrowly chose to reelect President Dilma Rousseff, and now she has an important choice to make about the future of Brazil’s economy: whether to take the necessary action to get Brazil’s economy back on track. Here’s an easy place to start: eliminate all tariffs and discriminatory taxes on information and communications technology (ICT) products and services.
Time for A Global Mercantilist Index
In order for the U.S. to take the lead in more effectively combating foreign mercantilism, it is time for Congress to provide the charge and the resources to the United States Trade Representative to develop an annual comprehensive ranking of nations’ mercantilist policies; in other words, a “Global Mercantilist Index”. ITIF's “Global Mercantilist Index” (GMI) uses a new comprehensive method to rank nations on mercantilist policies, while also proposing new policy tools to address the problem.
Mutual Assured Prosperity
Countries increasingly recognize that innovation drives long-term economic growth for nations throughout the world, but this realization has led to a fierce race for global advantage, as countries use whatever means at their disposal to incubate, grow, scale, and attract industries and enterprises in the highest-value added sectors of economic activity. It’s vital that the global economic system structures this competition around good innovation policies—such as investments in scientific research, education, and infrastructure—that produce win-win results for all countries, as opposed to ugly “innovation mercantilist” policies—such as localization barriers to trade, intellectual property theft, or unfair subsidies—that enable one nation and its enterprises to succeed at the expense of other competitors and nations in the global economy.
The Worst Innovation Mercantilist Policies of 2014
Innovation is a central driver of growth. As a result, an increasing number of countries are seeking to become innovation leaders. Unfortunately, the methods that many choose are grounded in “innovation mercantilism”: a strategy that sees technology-based exports as the key to success while relying on distortive and protectionist tactics to achieve that goal. These practices do not just damage other economies; they damage the entire global innovation system, leading to less innovation and productivity. Moreover, they often do not even help the countries embracing the practices, instead, mercantilist policies lead them to neglect the greater opportunity to spur growth by raising the productivity of all sectors of their economies, not just a few high-tech ones.
The Eight Worst Mercantilist Policies in 2014 Are:
- China: Abused its anti-monopoly law by instigating capricious investigations against foreign multinationals in order to protect domestic firms.
- China: Threatened the long-term viability of the global solar industry through massive and unfair subsidies to Chinese-owned solar companies.
- India: Issued a patent rejection for the cancer drug Abraxane.
- India: Introduced new telecommunications equipment tariffs.
- Indonesia: Prepared legislation that requires foreign Internet companies to store user data locally.
- Nigeria: Proposed “Guidelines for Local ICT Content Development.”
- Russia: Implemented localization requirements on Internet service companies.
- Spain: Passed legislation taxing Internet news aggregators for publishing snippets of articles in search results.